R200m payday for Purple Group’s Mark Barnes?

Purple Group founder Mark Barnes has entered into an agreement in which as much as 17.8% of the group will be sold to a new shareholder. The transaction is structured as a call option on a larger stake and a sale agreement on a smaller number of shares.

If the option is exercised over all the shares by June 28, and the sale shares are bought, an associate of Barnes will receive R198 million.

The associate, Business Venture Investments 1847 (BVI), is 50% owned by Barnes.

Read: Purple backtracks over chair Barnes’s R2.8m pay (Jan 2019)

The stake will be purchased by Firefly, which is headed by Paul Rutherford of Nire Capital, an investment firm “focused on technology enabled businesses”.

EasyEquities

Purple Group owns low-cost investment platform EasyEquities, which had over 260 000 funded retail accounts with R21.6 billion in assets by end-August 2020. The total number of accounts is now in excess of 950 000.

EasyEquities has grown aggressively in the past 18 months. A partnership with Capitec has seen the bank’s app now include an EasyEquities widget to enable direct investments to its customers. It has also launched EasyProperties, which enables fractional investing in rental properties, as well as EasyEquities Australia.

Read: How much could EasyEquities be worth? (May 2021)

The option entitles Firefly to acquire up to 134.5 million Purple Group shares; 13.3% of shares in issue from BVI at a price of R1.10 per share.

This is an 11% discount to Tuesday’s market price of R1.23 when the transaction was announced, and a 19% discount to Purple Group’s 52-week high.

If Firefly exercises an option over at least 50 million shares, BVI will sell a further 45.45 million shares (4.5% of the company) at R1.10 per share.

If it fails to meet this hurdle, BVI will only sell 41.7 million shares (4.1%) at a higher price of R1.20 per share.

If only the “adjusted sale shares” are sold, BVI will net R50 million, while the maximum consideration for the option and sale shares is R197.999 million.

BVI owns 33.8% of the group (332 million shares). If the option over all the shares is exercised and the sale shares purchased, this stake will reduce to 15.5%.

BVI will then become the single largest shareholder in Purple Group with an 18.3% stake.

Barnes says: “As a founding shareholder in Purple we are excited to enter a new chapter in Purple’s evolution and I am confident that we have identified the right strategic partner to work with management to take the group to the next level.”

Barnes has been a regular recent seller of shares comprising his direct stake in the business:

• December 9, 2019 – one million shares at 32c
• January 16, 2020 – one million shares at 35c
• June 9, 2020 – 400 000 shares at 50c to 51c
• August 13, 2020 – 700 000 shares at 56c
• Nov 30/Dec 1, 2020 – one million shares at 102c to 110c
• January 28, 2021 – one million shares at 84c
• February 26, 2021 – one million shares at 84c
• April 22, 2021 – 898 826 shares at 131c to 136c

At the end of August 2019, he held 39 million shares in Purple (in 2016, this number was 44 million). By August 2020, this was 34 million. There has been a sale of an additional roughly four million shares since that date.

Purple Group says Firefly will “in due course … cede and assign its rights and obligations under the agreement to an investment partnership, which will be managed by Paul Rutherford on behalf of the general partner of such partnership”.

On completion of the transaction, Rutherford will be appointed to the Purple Group board.

Rutherford says: “We have been tracking the progress of Purple for some time and are excited to be afforded this opportunity by BVI to invest directly into Purple and actively partner with the founders and management teams to continue to build Purple into a market leading fintech group.”

Prior to founding Nire Capital, Rutherford was head of investments and M&A for Africa, Middle East and North Africa at Naspers until 2015. He was an early investor in on-demand delivery service OrderIn as far back as 2013.

Nire Capital has two disclosed investments (Digital Risks and Superscript), both start-ups in London. It participated in the Series A rounds of both.

Purple CEO Charles Savage says: “We welcome our new shareholder Firefly on board and look forward to working with them to capitalise on the foundation that has been laid as we continue on our growth path.”

Listen to this MoneywebNOW podcast with Simon Brown (or read the transcript here):